TrendSpotters Blog

Cross-Asset Trading #005 (Part 2)

January 17, 2012 By Candyce Edelen 1 Comment

In this the second part of this two-part TrendSpotters installment, I continue my conversation with Harry Gozlan of smartTrade Technologies and Greg Wood of Credit Suisse on cross-asset trading. You can listen to part 2 the discussion by clicking below:

Cross-Asset Trading, Part 2

Podcast: Download (24.5MB)

You can also click here to read a transcript of the conversation.

During the second half of our conversation, we dig deeper into talking about the complexities of cross-asset/multi-asset trading, profitability and wallet share.

To gain further insight on the evolving landscape of multi-asset trading, read smartTrade’s informative whitepaper:

Meeting Multi-Asset Trading Challenges: Workable Approaches for Success in a Dynamic Capital Markets Arena

This whitepaper goes into detail about the components needed to build a global multi-asset trading platform.

Click here for part 1 of the conversation.

TrendSpotters by PropelGrowth is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Warm regards,

Candyce

Filed Under: TrendSpotters Tagged With: buy-side, cross-asset trading, derivatives, equities, etf, exchange-traded fund, fixed income, foreign exchange, forex, fx, liquidity, management, multi-asset trading, multi-leg, propelgrowth, risk management, securities, sell-side, strategy, synthetic instrument, TrendSpotters

Cross-Asset Trading #005 (Part 1)

January 17, 2012 By Candyce Edelen 2 Comments

In this installment of the TrendSpotters Thought Leadership Series, we consider the evolution of cross-asset trading, how the industry is changing, and the drivers behind these changes. Joining me are Harry Gozlan, CEO and Founder of smartTrade Technologies, and Greg Wood, Futures Business Development Manager at Credit Suisse’s Advanced Execution Services.

Because of the complexity of this topic, we’ve segmented this episode into two parts. This post contains part 1.

My interview with Harry and Greg was fascinating. They stand at the forefront of this cross-asset trend, and the shared a lot of interesting insights with me. I invite you listen in by clicking below:

Podcast: Download (16.1MB)

You can also click here to read a transcript of the conversation.

Emerging Trends in Cross-Asset Trading

The institutional investment industry not only wants, but needs, to do more with less. Bank consolidation continues worldwide, while the emphasis on holistic enterprise risk management increases challenges for dealing banks and their clients in a post-Dodd-Frank world. These forces have combined to force the industry to simplify products to improve transparency. The process of simplification has spurred growth in cross-asset trading as asset managers look for alternative alpha.

In the interview, Harry Gozlan points out that buyside demand, particularly from hedge funds have driven the evolution of cross-asset trading. Hedge funds asked for a “single access point to multiple assets to do cross-asset trades, either through auto-hedged securities…,cash against futures, basis trades,” or other combinations. Gozlan points out that traditionally, banks have maintained “siloed FX, equities and rates systems… [assembling] a single entry point to all these assets to provide a kind of cross-asset service to clients.”

As Greg Wood comments in the interview, “People are taking natural steps of looking for alternative alpha. They may be trading domestic equities first. Then they look into cross-border trading. They use derivatives as a hedge… or as an alternative source of alpha. This introduces multi-asset capacity to their trading, where they want to be able to trade each of these asset classes in a similar manner, and then ultimately, manage, risk manage, [and] position-manage those asset classes.”

Cross-asset trading, much of it over-the-counter (OTC), can involve any number of instruments, from conventional equities and fixed income products with FX components, to interest rates and futures, also often involving foreign exchange as well as options for hedging. But while the siloed approach can work in the short term, growing volume in cross-asset execution requires the technological capabilities to exploit and actively manage an institutional client’s overall book of business with the trading partner. This requires a standardized approach to pricing, routing and execution, and ideally should enable clients to use similar execution algorithms across a variety of trading instruments.

Client demand is not uniform and not static. Whereas large institutional traders or hedge funds may need to execute and measure several components in multiple series of trades, other clients require reliable execution and reporting predominantly for trading in one instrument. Servicing both kinds of client order flow – and any number in between demands a simply designed yet flexible system that standardizes the trading workflow.

Risk management and best execution mandates are also placing demands on sell-side firms to provide more execution transparency. This demand will only grow in the future, requiring firms to standardize their approach to market data aggregation, internalization, and smart routing while also consolidating and harmonizing their approach to risk management across instrument types.

We invite you to read smartTrade’s informative whitepaper on the evolving landscape of multi-asset trading:

Meeting Multi-Asset Trading Challenges: Workable Approaches for Success in a Dynamic Capital Markets Arena

This whitepaper goes into detail about the components needed to build a global multi-asset trading platform.

Click here for part 2 of the conversation.

TrendSpotters by PropelGrowth is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Warm regards,

Candyce

Inbound Marketing and the Findability Factor #004

April 26, 2011 By Phil Donaldson 1 Comment

In this TrendSpotters installment, Candyce has a conversation with Heather Lutze of Findability Group Internet Marketing about techniques to help businesses dominate in search results. Heather is the author of The Findability Formula: The Easy, Non-technical Approach to Search Engine Marketing as well as a columnist for Website Magazine. More than a search engine optimization expert, Heather specializes in overall findability and the strategies that help to fuel inbound marketing.

Podcast: Download (20.6MB)

Recently, I attended Socialize East, a social media conference in midtown Manhattan, with the intention of gaining insights into B2B social media optimization. The only session that gave me information I could act upon was Heather’s. The Findability Formula for Linkedin: B to B Social Media Made Profitable was an informative presentation on the use of some “hidden” Google tools as well as how to tweak one’s LinkedIn profile for optimal findability. Heather presented with such clarity (and humor) that I had to get her on TrendSpotters. She is a sought-after speaker on the subject and it’s not hard to figure why this is when listening to the interview.

Back in the early days of the web, traditional marketing approaches such as ads and generic “push” messaging was the norm. Websites were nothing more than online brochures written from that business’ perspective of how they thought customers should buy from them. As more and more buyers began using online tools to research solutions to their business problems, it became apparent to savvy marketers that a customer-centric approach to online lead generation was the way to go. It is this same concept of getting into the buyer’s head, marketing to the way they search, that Heather discusses with Candyce.

Starting with a spot-on definition of findability, Heather speaks about how website content must be relevant to the person doing the searching. She further mentions that companies must think on a broader level to use search engines (as well as social media) for delivering high quality inbound traffic. Knowing how people search is essential to generating quality content across all assets (website, blog posts, video, social media, etc.). Heather also shares search techniques using the Google Wonder Wheel and the Google Keyword Tool to determine highly optimized keywords that connect businesses with searchers who are ready to engage.

Search engine marketing and search engine optimization have become closely linked with social media, a fact that companies cannot afford to ignore. With the inclusion of social media content in Google search results, the strategic use of platforms like Twitter, LinkedIn and Facebook has become essential to inbound marketing success. If you’re serious about improving the quality of your inbound leads, you’ll want to hear what Heather has to say. Read more about Heather and read her articles by clicking here.

We welcome your comments. Please join with us in the TrendSpotters discussion community, where you can share your opinions, ask Heather questions, and debate the issues with other community members. We’d love to have you involved in the discussion. You can also join the conversation on Twitter by using the hashtag #TrendSpotters.

TrendSpotters by PropelGrowth is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Filed Under: TrendSpotters Tagged With: b to b, b2b, business to business, customer-centric, findability, inbound marketing, marketing, marketing strategy, search engine marketing, search engine optimization, sem, seo, social media, TrendSpotters

High Speed Market Data #003

March 17, 2011 By Candyce Edelen Leave a Comment

In our third installment of the TrendSpotters Thought Leadership Series, I interviewed Frank Piasecki from ACTIV Financial about the trends in high speed market data.

Podcast: Download (21.3MB)

We talked about the evolving needs of firms of varying size and business focus – from large multinational sell sides to medium buy sides to high frequency proprietary trading. In the past few years, most firms have had to focus on reducing market data latency to the lowest possible level within their budgetary restraints. However, latency is not the only consideration. Throughput is also a big issue, as is normalizing market data from multiple sources and managing it within the consuming facility’s infrastructure.

Frank points out in the interview that firms need to consider several key issues in thinking through market data infrastructure:

Coverage – what asset class, data breadth and regional feeds are needed?
Applications – will the data be used to support click trading, high touch trading or algorithmic black boxes? All have very different criteria for how they consume and use market data
Location – will the consuming system be co-located with the market data source?
Volume – what is the volume of the feed, and what demands will this place on infrastructure?

Low latency has different definitions based on the type of data and asset class. For example, equity options data is very different in character, speed, and throughput than fixed income data. Different use cases also demand different types of data. For example, click trading may need substantial conflation and filtering to show the trader what they need, while an HFT strategy needs to see every quote and every tick.

We also discussed the increasing global nature of trading, even for smaller shops. Frank pointed out that even very modest shops are trading in multiple regions in Europe, Asia, North America, and Latin America. These smaller shops are now able to take advantage of infrastructure that has been built up by the industry over time to gain cost effective access to global data streams.

Large institutions have broader needs. They need to source an aggregated set of global data plus internally generated data, and then distribute it to a wide group of applications, each of which requires very different views of the data. In addition, as competition increases in Europe and Asia, more data feeds are available from the various ATS’s, ECNs and MTFs. Trading volume has grown around the globe, causing market data volumes to grow dramatically and putting pressure on existing infrastructure.

We discussed some of the trends in Europe and Asia. In the EU, the lack of a consolidated tape persists in spite of MiFID. Issues driving this include disparate trading rules, a lack of standardization in trade conditions, and proprietary symbology. In Asia, the problem is different. There, the sheer distance between venues is enormous. Other issues affecting aggregation of Asian data include language barriers, regulatory differences, limited transparency, and a high cost for connectivity infrastructure.

We also talked about hardware acceleration. Whether through FPGA or other strategies, many firms are now starting to adopt hardware acceleration not only as a means of reducing latency, but more importantly as a way to reduce cost. These methods use less horsepower, less space and less electricity; making them extremely attractive for managing skyrocketing market data volumes and the associated infrastructure costs.

Hardware acceleration is a hot topic, and we’re going to do a TrendSpotters installment specifically on this trend. So stay tuned.

For now, enjoy my interview with Frank! Click here to listen to the podcast. If you prefer, you can download the transcript of the recording here.

We welcome your comments. Please join with us in the TrendSpotters discussion community, where you can share your opinions, ask Frank questions, and debate the issues with other community members. We’d love to have you involved in the discussion. You can also join the conversation on Twitter by using the hashtag #TrendSpotters.

TrendSpotters by PropelGrowth is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Warm regards,

Candyce

Filed Under: TrendSpotters Tagged With: activ financial, algorithmic trading, asic, b to b, b2b, data management, database, financial techology, fintech, fpga, Frank Piasecki, hardware acceleration, high frequency trading, high speed market data, market data, propelgrowth, TrendSpotters, xilinx

The Challenges of FX Ecommerce #002

March 3, 2011 By Candyce Edelen 1 Comment

We’ve just completed our second installment of the TrendSpotters Thought Leadership Series. In this episode, I interviewed Dr. John Bates, Chief Technology Officer and Dan Hubscher, the Director of Industry Solutions for Capital Markets at Progress Software.

Podcast: Download (16.2MB)

We talked about the current state of foreign exchange electronic trading, how banks are building single-dealer platforms (also known as FX ecommerce systems), and the challenges presented by this highly fragmented and opaque asset class.

The FX market is huge. According to the Aite Group, in early 2010, the market reached $4.5 trillion dollars a day. Trading is decentralized and is supported by commercial banks that serve as principals or intermediaries between buyers and sellers of currency pairs. FX trading includes spot, forwards, swaps and futures. Because FX trading is conducted primarily over the counter (OTC) between banks, pricing is extremely complex. To support electronic trading in FX, banks must develop sophisticated dealing platforms.

First of all, a dealing system needs to aggregate data from many different sources including data feeds such as Reuters, multiple ECNS, interdealer brokers, and dealing banks. So automated pricing engines require a view of liquidity from multiple sources. This requires extensive API connectivity, specialized feed handlers, and physical connectivity to pricing feeds from dozens of disparate sources around the globe.

But the complexity doesn’t end with aggregation. Once banks have a view of liquidity, they also must establish pricing algorithms that account for shifts in that liquidity, choose spreads to offer, hedge risk, manage positions, and incorporate commissions – all in a real-time, highly volatile environment.

Then, banks must publish prices out to clients. But this too adds complexity. Banks need to provide aggressive pricing to attract customer order flow, but not all business entails the same level of risk. In addition, different classes of customers have different needs. For example – traditional FX customers such as multi-national corporations value large size and ability to complete transactions quickly, while hedge funds running statistical arbitrage strategies generally deal with smaller and more frequent transactions and value lower execution costs. This creates a demand for tiered pricing and service packages based on client segment.

Single dealer platforms also need credit/margining systems, gateways and trading GUIs for clients, and connectivity to the back office and to bank and customer portfolio systems.

To further complicate matters, risk management and hedging needs to be handled in an environment of fast moving prices where substantial activity occurs outside of regular data distribution intervals and where the market can move against a trade in an instant. As high frequency trading ramps up in the FX world, new complexities are introduced. Most FX market data is delivered in pulse intervals instead of continuously, and most ECNs impose throttling to limit the number of orders that can be submitted within a rolling time window. Some also impose fill ratio requirements.

In spite of these hurdles, the number of single dealer platforms is growing, and the amount of FX trading done on these platforms now exceeds 35% of the overall FX daily volume, according to Aite Group. As the platforms grow more sophisticated, we expect to see even more adoption of electronic trading.

I hope you enjoy the podcast. You can find the transcript of the recording here. We also have an article on the subject provided by the A-Team Group. You can click here to access that article.

We welcome your comments. Please join with us in the TrendSpotters discussion community, where you can share your opinions, ask John and Dan questions, and debate the issues with other community members. We’d love to have you involved in the discussion. You can also join the conversation on Twitter by using the hashtag #TrendSpotters.

TrendSpotters by PropelGrowth is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Warm regards,

Candyce

Filed Under: TrendSpotters Tagged With: aggregation, algorithmic trading, automated, automation, bank, flow, foreign exchange, forex, fx, fx ecommerce, hedge, hedging, HFT, high frequency trading, interview, management, market, order, podcast, price, pricing, real-time, risk, single dealer platforms, Thought Leadership, trading, TrendSpotters, webcast

OMS/EMS: History, Evolution and the Future #001

February 18, 2011 By Candyce Edelen Leave a Comment

We’re pleased to present the first installment of the TrendSpotters Thought Leadership Series. In our first podcast, we interview Bill Hebert, an authority in order management systems (OMS) and execution management systems (EMS). You can read Bill’s bio here.

Podcast: Download (18.8MB)

Bill is currently an executive director with CFS Consulting Services in Boston. I met Bill back when he was a Vice President of Strategic Development and Electronic Trading at Fidelity. He’s also worked in senior positions at Thomson Financial, the Boston Stock Exchange, and Charles River Development.

In this podcast, Bill and I explore the history, current state, and future trends for the order management and execution management platforms. We discuss the genesis of the OMS systems, which were originally designed to consolidate and manage order flow for the buy side, aggregate orders for the same stock from multiple portfolio managers, process indications of interest, route orders to the sell side, and handle post-trade allocations. OMSs either started with or evolved to include compliance, modeling, and functionality to make intelligent trading decisions. They also generally incorporate FIX connectivity systems using the FIX protocol for electronic communication and trading. In the past 10-15 years, OMS platforms have progressed to become the hub of processing within the institutional trading room.

We also discuss the evolution of the execution management systems. Originally developed for the sell side, these systems evolved out of the trading universe, supporting program trading desks that were handling lists and block orders from the buy side. EMSs evolved as liquidity became more fragmented, and as market structure changed with the proliferation of ECNs, ATSs and “Dark” pools. Regulatory changes such as Regulation NMS also created more demand for liquidity discovery and intelligent order routing. In developing the tools to efficiently access multiple liquidity sources, EMSs incorporated more sophisticated market and analytical data management and intelligent electronic trading capabilities.

The market has evolved, and demand for the EMS platforms on the buy side has grown dramatically in the past several years. This has driven some convergence between OMS and EMS systems. The systems have also evolved, incorporating execution algorithms, often provided by brokers, that the buy side can configure according to their specific trading objectives. The buy side has become increasingly sophisticated in accessing liquidity, increasing demand for sophisticated EMS systems.

Development roadmaps for EMS and OMS platforms are being heavily influenced by the hedge fund community, which tends to focus on quantitative trading strategies and functional sophistication. It is conjectured that the next generation of EMSs may include access to algorithms with research, news, and other data analytics as input – combining qualitative and quantitative data to drive trading decisions. Revenue models have also evolved. While many buy side trading desks pushed for multi-broker OMS platforms years ago, now execution management systems are seeing a similar push as the buy side strives to consolidate the number of trading platforms on their desks. While the distribution of OMS and EMS systems is seemingly ubiquitous in the US, Europe and other regions, substantial growth opportunities still exist from a global perspective, including growing interest in Asia Pacific and Latin America.

I hope you enjoy the podcast. We welcome your comments. Engage with us in the TrendSpotters discussion community, where you can share your opinions, ask Bill questions and debate the issues with other community members. You can also join the conversation on Twitter by using the hashtag #TrendSpotters.

Or simply leave a comment below.

TrendSpotters by PropelGrowth is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Warm regards,

Candyce

Filed Under: TrendSpotters Tagged With: b2b, bill hebert, buy, candyce edelen, ems, execution, execution management system, oms, order management system, sell, side, Thought Leadership, trade, trading, TrendSpotters

Cross-Asset Trading #005 (Part 2)

Cross-Asset Trading #005 (Part 1)

Emerging Trends in Cross-Asset Trading

High Speed Market Data #003

The Challenges of FX Ecommerce #002

OMS/EMS: History, Evolution and the Future #001

Featured Resources

PropelGrowth Blog

Subscribe

Connect With Candyce

Connect With Phil

@CandyceEdelen